BHP nets $650m on sale of Arizona mine – by Allan Seccombe (Business Day – April 30, 2013)

BHP Billiton, the world’s largest resources group, has sold a small, noncore copper mine in Arizona and an associated railway company for $650m, bringing its sale of assets in the past year to $5bn, BHP announced on Monday.

Analysts widely expect further asset sales from Australia-based BHP after Marius Kloppers stepped down as CEO. He was replaced by Andrew Mackenzie who has said he will focus on securing profit margins and cash flows by ensuring optimal performances from the group’s assets.

BHP sold Pinto Valley and the San Manuel Arizona Railroad Company to Canada’s Capstone Mining for $650m in cash in a deal subject to regulatory approval. The transaction should be concluded in the second half of this year.

“The sale of Pinto Valley is an excellent outcome for BHP Billiton shareholders,” Peter Beaven, president of BHP Billiton Copper, said yesterday. “It is consistent with our strategy and it takes the transaction value of divestments announced over the last 12 months to $5bn.”

Analysts said the price was well above what the market was expecting and that it was no surprise BHP was selling the business because of its small size and limited remaining life.

“The asset is clearly noncore for BHP given it is high-cost, short-life and small, with no material expansion opportunities,” JP Morgan Cazenove said.

“This transaction marks the fifth asset sale in a year at a price above market expectation, establishing a strong track record for BHP’s divestment programme.”

Analysts said BHP had assets worth between $20bn and $40bn that it could sell, but would do so cautiously for fear of making the asset sale market “too crowded”.

The sale comes after BHP sold its diamonds business as well as assets in uranium and mineral sands, the latter being its stake in Richards Bay Minerals in South Africa, achieving good prices.

“This highlights that while it is taking time for BHP to simplify its portfolio, it is not being done at fire sale prices,” JP Morgan said.

“We expect further asset sales near term, although finding willing and able buyers in the current environment is likely to become more difficult, in our view.”

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